🔗 Share this article

The Japanese economic system has shown a decline for the first time in a year and a half, primarily driven by falling exports due to newly imposed American trade duties.

G7 Economic Rankings

The Japanese economy has become the initial Group of Seven country to report an economic contraction in the previous quarter.

As the United States yet to publish its gross domestic product figures for Q3 2025, the present G7 growth leaderboard indicate:

• The French economy: 0.5 percent quarterly growth
• UK: +0.1%
• Canadian economy: 0.1 percent (preliminary figure)
• Germany: zero growth
• Italian economy: no growth
• Japan: -0.4%

Travel Shares Slump amid Diplomatic Dispute with Beijing

Alongside the economic contraction, Japan is dealing with an escalating political dispute with China regarding Taiwan.

Shares in Japan's travel and retail companies have declined significantly after China recommended its citizens to avoid visiting to Japan.

This action by Beijing heightened a diplomatic feud that was initiated by comments from Japan's new PM about the possibility of deploying forces in the case of a potential Chinese attack on Taiwan.

The situation caused a wave of selling across Japanese tourism-related shares.

• Oriental Land stock dropped by 5.7%
• The department store chain tumbled by 11.3 percent
• The national carrier declined by 3.75%

"The China-Japan tension over Taiwan and Beijing's travel warning discouraging visits to Japan brings short-term challenges for retail and hospitality sectors.

"Tourists from China account for roughly 25% of Japan's international visitors, making department stores, high-end shopping, and tourism services especially at risk."

GDP Decline Details

Japan's GDP declined by 0.4% in the third quarter, as manufacturers' exports were impacted by duties levied by the US recently.

Exports were a major driver of the contraction, dropping by 1.2 percent compared with the April-June quarter, and were 4.5 percent lower than a year ago.

Previously, the American government had threatened Japan with a new 25% tariff on its products, which was later reduced to 15 percent when the two countries reached a trade deal.

Consumer spending also fell, by 0.3% quarter-on-quarter.

On an annualized basis, Japan's GDP contracted by 1.8% in the quarter through September.

"Japan's economy was stable in the initial six months of this year and the latest GDP data showed that growth is halted for now.

I anticipate Japan's economy to be returning on a gradual growth trend going forward."

The White House has lately recognized the effect of tariffs on US consumers, lowering tariffs on imported food products including meat, produce, coffee and bananas amid growing concerns about rising costs.

Economic Agenda

• 8am GMT: Swiss GDP report for Q3
• 15:00 Greenwich Mean Time: US construction spending data for August